On Thursday, SMIC, a prominent Chinese chip manufacturer, revealed a significant year-on-year decline in profits for the second quarter, amid ongoing domestic price wars and technological competition between Beijing and Washington. In recent years, the United States has implemented measures to restrict Chinese companies' access to its technology and has imposed stricter controls on semiconductor exports to China, the world's second-largest economy. SMIC, listed in both Hong Kong and Shanghai, has been a key target of these actions. The Chinese government, aiming to enhance the nation's capacity to produce advanced chips independently, argues that the US measures are designed to maintain its dominance in this critical sector.
In a statement to the Hong Kong Stock Exchange, SMIC reported that its second-quarter profit attributable to owners was $164.6 million, a 59.1 percent decrease from the same period in 2023. Despite this, revenue rose to $1.90 billion, marking a 21.8 percent year-on-year increase and a step up from the $1.75 billion recorded in the first quarter. The company anticipates continued revenue growth in the third quarter, with an expected increase of 13 to 15 percent from the second quarter. Computer chips are fundamental to various sectors of the modern economy and are increasingly vital for national security, being used in a wide range of products from televisions and cars to weapons and satellites.
As geopolitical tensions between China and the United States escalate over issues such as Taiwan and the South China Sea, both nations are striving to gain an advantage in this strategic field. China currently lacks the ability to produce large volumes of the smallest and most advanced chips, making it reliant on foreign suppliers. Although significant progress has been made with billions of dollars invested by the Chinese government, the technical performance of China's leading firms still trails that of TSMC, the Taiwanese giant responsible for over half of global chip production. Experts suggest that SMIC has succeeded in producing a highly advanced seven-nanometre chip, which would mark a significant achievement for the Chinese semiconductor industry. SMIC has not confirmed these claims.
